NAZEEMA BEEVI Vs. COMMISSIONER OF WEALTH TAX MADRAS

JUDGEMENT

(1.) (on behalf of himself and Al. A. SATHAR SAYEED J.) The above tax cases arise under the W.T. Act, 1957 (called "the Act"). The question of law that has to be answered by the Full Bench may be stated as follows: "Which debts have to be excluded and to what extent, if any, from the computation of the net wealth under the Act by reason of the assets securing those debts or a portion of the value thereof being exempt under one or the other provisions of s. 5 of the Act. The reference to a Full Bench has been necessitated by reason of the conflicting views expressed in Srinivasan v. CWT and CIT v. Rajam as well as CWT v. Satish The facts in the Tax Cases may be briefly stated as follows: T. Cs. Nos. 369 to 371 of 1977. The assessee in these cases is one K. S. Vaidyanathan. The relevant assessment years are 1971-72, 1972-73 and 1973-74. The wealth with which we are concerned in these cases consists of shares. The assessee returned wealth of Rs. 2, 71, 596, Rs. 2, 54, 161 and Rs. 1, 66, 791, respectively. He claimed liabilities of Rs. 2, 12, 767, Rs. 2, 17, 472 and Rs. 2, 39, 464 respectively which included overdrafts from various banks of Rs. 1, 84, 642, Rs. 1, 86, 598 and Rs. 1, 98, 774, respectively. The WTO found that the overdrafts were taken for the purpose of purchasing shares of new companies and since part of the shares to the extent of Rs. 1, 50, 000 would be exempt under s. 5(1)(xxiii) of the Act, only a proportionate loan by way of overdraft should be disallowed in relation to the exempted asset. Accordingly, he held that the assessee would be entitled only to a disallowance of a proportionate loan by way of overdraft in relation to the exempted asset. In that view, he added back certain amounts for the various years and allowed exemption only to the extent stated above. The assessee went on appeal before the AAC. But the appeal was dismissed. The assessee took the matter in second appeal before the Tribunal. The Tribunal set aside the order of the WTO as confirmed by the AAC and allowed the assessee's appeals holding that the assessee would be entitled to the full deduction of the liability as claimed by him. At the instance of the Revenue, the Tribunal referred the following question of law for the opinion of this court"

(2.) WHETHER, on the facts and in the circumstances of the case and having regard to the provisions of section 2(m)(ii) of the Act, it has been rightly held that the entire overdrafts from bank should be deducted though the loan was secured on the shares, a portion of which was exempted " "T. Cs. Nos. 817 to 819 of 1977 The assessee, in these cases, returned a net wealth of Rs. 3, 70, 533, Rs. 2, 99, 011, and Rs. 5, 55, 427 for the assessment years 1971-72, 1972-73 and 1973-74, respectively. He also claimed a deduction of Rs. 96, 905 representing mortgage loan due to the Life Insurance Corporation which was obtained for the purpose of constructing the house property and Rs. 35, 000 loan due to the Bank of Baroda for the assessment year 1971-72, Rs. 84, 902 towards mortgage loan and Rs. 40, 827 towards bank loan for the assessment year 1972-73 and Rs. 71, 577 towards the mortgage loan and Rs. 39, 150 towards the bank loan (for 1973-74). The WTO as well as the AAC did not allow full deduction of the amounts claimed by the assessee. On appeal by the assessee, the Tribunal, however, allowed full deduction of the amounts claimed by the assessee. Hence, at the instance of the Revenue, the Tribunal has referred the following question of law for the opinion of this court" WHETHER, on the facts and in the circumstances of the case and having regard to the provisions of section 2(m)(ii) of the Act, the Appellate Tribunal was right in holding that the entire debt, viz., the loan taken from Life Insurance Corporation, should be deducted in entirety from the total wealth of the assessee though the debt is secured on the life insurance policy which is an exempted asset under section 5(1)(vi) up to a sum of Rs. 1, 00, 000 " "T. Cs. Nos. 849 and 850 of 1977 The assessee, in these cases, claimed a deduction of Rs. 83, 335 and Rs. 75, 720 representing debts due to the Life Insurance Corporation of India which was disallowed by the WTO as well as the AAC. But on appeal, the Tribunal allowed those deductions. Hence, at the instance of the Revenue, the Tribunal has referred the following question of law for the opinion of this courtWHETHER, on the facts and in the circumstances of the case and having regard to the provisions of section 2(m)(ii) of the Act, the debt representing the loan taken from the Life Insurance Corporation was deductible in full from the total wealth of the assessee though the debt is secured on the life insurance policy which is an exempted asset "" T. Cs. Nos. 901, 902 and 903 of 1977

(3.) THE assessee in these cases claimed a deduction of Rs. 69, 716 for the assessment year 1972-73, Rs. 63, 501 for the assessment year 1973-74 and Rs. 56, 842 for the assessment year 1974-75 representing loan from the Life Insurance Corporation of India secured on the policy is well as on the house property. THE WTO rejected the claim. But, on appeal by the assessee, the AAC allowed the deductions as claimed by the assessee. On further appeal by the Revenue to the Tribunal, the Tribunal confirmed the, order of the AAC. Hence, at the instance of the Revenue, the Tribunal has referred the following question of law for the opinion of this court. "Whether, on the facts and in the circumstances of the case, Rs. 69, 716, Rs. 63, 501 and Rs. 56, 842 being the amounts due by the assessee to the Life Insurance Corporation of India are to be deducted from the aggregate value of the assets in computing his net taxable wealth for the assessment years 1972-73, 1973-74 and 1974-75"" * T.C. No. 478 of 1978, T.C. No. 1603 of 1977 and T.C. Nos. 209 to 212 of 1978. THE facts and the question of law referred by the Tribunal for the opinion of this court are similar to the one or the other of the cases referred to above and, therefore, they are not stated again here. T.C. No. 1409 of 1977. THE assessee in this case owned a house property which was partly let out and partly occupied as his dwelling house. THE property was valued at Rs. 1, 75, 300. On this property, there was a mortgage loan to the extent of Rs. 19, 000 for the assessment year 1972-73. THE assessee claimed deduction of this amount. THE WTO allowed a proportionate deduction. THE assessee appealed. THE AAC confirmed the order of the WTO. However, on further appeal to the Tribunal, the Tribunal allowed full deduction. Hence, at the instance of the Revenue, the Tribunal has referred the following question of law for the opinion of this court "Whether, on the facts and in the circumstances of the case and having regard to the provisions of section 2(m)(ii) of the Wealth-tax Act, the entire mortgage loan on the property should be deducted though the loan was secured on the property half of which was exempted "" T.C. No. 423 of 1978 THE assessee in this case claimed a deduction of Rs. 1, 92, 666, loan due to Canara Bank and which was secured by the pledge of National Defence Gold Bonds. THE WTO did not allow this deduction. THE appeals filed by the assessee before the AAC as well as the Tribunal were dismissed. Hence, at the instance of the assessee, the Tribunal has referred the following question of law for the opinion of this court. Whether, on the facts and in the circumstances of the case, the sum of Rs. 1, 92, 666 was a proper deduction in computing the net wealth of the assessee for the assessment year 1971-72 " T. C. No. 410 of 1978.